Common Real Estate Scams And How To Avoid Them: Expert Tips

Identity theft. Cybercrimes. Hacking. Phishing. We’ve all heard horror stories of how scammers use these tactics to take advantage of unsuspecting individuals. But they don’t stop there. Real estate transactions are one of the most common areas that criminals target.

Why? Because there are large sums of money involved, usually hundreds of thousands of dollars. Sensitive information is being shared across multiple parties. And the average consumer may not fully understand all of the complex, legal terms used within the real estate industry. First-time home buyers can be particularly vulnerable. Meanwhile, the scammers employ increasingly elaborate and sophisticated ploys.

But we’re not here to harp on the bad news. We’re here to educate you about some of the most common real estate scams and what you can do to protect yourself and your hard-earned money – and you can get on with the business of enjoying your home.

Scams to be on the lookout for

1. Loan modification and foreclosure assistance scams

The scam: Many homeowners have faced foreclosure in recent years and many more are still under water on their mortgages. These desperate borrowers can be easy marks for those running loan modification scams. A number of scams fall into this category, so be on the lookout for any of these terms: fake foreclosure counseling, forensic loan auditing, non-existent class action lawsuits, leaseback programs and fraudulent “government” modification programs. Most of these scams begin with a simple phone call to a distressed homeowner, promising a lifeline in the form of a foreclosure-related service. In almost all cases, you will be asked for fees to get the process started. In the fake leaseback deal, you also surrender the title or deed to your home.

To avoid real estate scams, remain cautious of upfront fees requested by telephone callers. Scammers often engage in multiple calls to build trust before asking for payments. Remember, foreclosure counseling is free from Housing and Urban Development-approved agencies. Before committing to any loan modification, research options and compare offers from reputable lenders. Major lenders like AmeriSave participate in government programs such as FHA Home Affordable Modification Program and Veteran’s Affairs Home Affordable Modification. For a comprehensive list of government loan programs, visit ConsumerCredit.com. Your current mortgage provider can also provide guidance on loan modifications and refer you to local housing counselors. AmeriSave, a direct lender, has assisted numerous customers with refinancing their homes successfully.

Learn more at www.makinghomeaffordable.gov.

2. Escrow and wire fraud

The scam: Your lender will set up an escrow account to cover certain expenses related to your mortgage. Scammers can trick people into wiring funds to a fraudulent escrow account. They do this by sending a fake email, making a phony phone call or setting up a fake website that instructs you where to wire the money. They may even hack into your email and steal your information. These scenarios can also occur when wiring large sums of money for your down payment.

How to avoid it: Before authorizing the wiring of any funds, call the phone numbers on the original loan documentation (to avoid spoofed phone numbers that may be sent to you later in the loan process) from your lender so you can verify the wiring instructions. Confirm the escrow account number too. Look out for any communication that indicates wiring instructions have changed. After the transfer, call the settlement agent to confirm receipt of your funds.

3. Title or deed scams

The scam: We alluded to this one as part of the loan modification scam (i.e., fake leaseback deal). In this case, scammers illegally obtain the title or deed to someone’s property without their consent, perhaps by posing as a real estate professional or even by forging documents. Vacant and unused properties are at much greater risk, and victims could even lose their homes if the scam is successful.

How to avoid it: Pay close attention during every stage of your real estate transaction, but particularly when money and information is being exchanged. Keep an eye out for signs that anything is amiss at your property. Take comfort in the fact that a title search and title insurance are part of your transaction and serve to confirm the validity of the deed and the property’s rightful legal owner. Report anything suspicious to the Federal Trade Commission (FTC).

4. Predatory lending by excessive refinance transactions

The scam: In this case, a predatory lender will approach a homeowner about refinancing their mortgage, and they’ll do this repeatedly so that the homeowner ends up borrowing more money every time. There will probably be high interest rates and fees associated with each loan “flip,” and ultimately, the lender could take ownership of the property if these aren’t paid. Often times, senior citizens can be more vulnerable to this type of real estate scam because they have usually built up a lot of equity in their homes and an offer to extra cash flow when out-of-work can be an attractive offer.

How to avoid it: Don’t let yourself be persuaded to take out a mortgage you do not need nor want. If you’ve just refinanced, you likely don’t need to do so again. Watch out for a lender rushing you to sign mortgage documents. Talk to a trusted real estate agent, mortgage banker or even a family member or friend before making these type of decisions. Many states have tangible net benefit forms to help borrowers review mortgage documents and make smart financial decisions. For more on preventing senior citizen and elder real estate fraud, checkout the FICO blog.

5. Fake agents

Scammers may pose as real estate professionals or claim to represent legitimate lending institutions when they’re not. Some agents may exaggerate their experience or promise ideal buyers, asking for your bank details to supposedly facilitate transactions, only to drain your accounts.

Avoidance tips: Seek recommendations from friends or check online reviews for reputable agents. Verify their current state-issued license on the real estate licensing website. Cross-check their credentials and reputation on platforms like Angie’s List, Yelp, and the BBB. Beware of agents who pressure you to act quickly or make unrealistic promises.

6. Real estate workshop scams

Many self-proclaimed real estate experts lure aspiring investors with get-rich-quick schemes through paid workshops. These seminars often promise insider secrets but deliver little beyond sales pitches for more seminars and costly supplementary materials.

Avoidance tips: Research the workshop and its organizers thoroughly. Consult with an investment advisor and check the Better Business Bureau rating of the company before signing up.

7. Cash for homes

Advertisements offering cash for homes can be tempting for homeowners facing financial difficulties. Scammers might persuade you to sign over your deed before payment, leaving you responsible for the mortgage while they lease your home to others.

Avoidance tips: Verify the legitimacy of cash buyers by checking for a physical office, a professional website, and a solid history of cash transactions. Consult a reputable real estate agent to assess your home’s true value and consider the trade-offs between selling quickly for cash and retaining equity.

8. Unsolicited offers to buy

Scammers send postcards or mailers offering quick cash for your home, targeting homeowners looking to sell fast. They exploit sellers who may not understand their home’s true value or who are in urgent financial situations.

Avoidance tips: Be cautious of mailers promising a “fair price.” Research your home’s market value independently and weigh the convenience of a quick sale against potential equity losses. Seek advice from trusted sources like family, friends, or established real estate professionals.

9. Home inspection scams

Fraudulent home inspectors may misrepresent or conceal property issues to deceive buyers or sellers. They might add unnecessary inspection fees or recommend unneeded repairs to receive kickbacks from contractors.

Avoidance tips: Obtain recommendations for home inspectors from your real estate agent. Verify their credentials and experience, review the inspection report thoroughly, and question any discrepancies or concerns raised during the inspection process.

10. Rental scams

The scam: Most renters search for homes and apartments online. Scammers are aware of this and take advantage of internet listing data of actual homes for rent or for sale by reposting them as their own property on popular websites, like Craigslist. The scammer then asks the renter for a security deposit or broker fee upfront. They commonly ask for a fee to perform what is a phony credit check – and then they disappear. If prospective renters do hear anything at all back from the “agent” again, it will be to issue a denial of their “application.”

How to avoid it: Be wary if you’re asked to wire any money upfront, especially if you’ve never met or signed a contract. Some scammers have actually gained access to homes, advertising and showing them at alluringly low prices, so don’t let your guard down just because the “agent” has walked you around a home. Finally (do we really have to say this?), if the person responding to your inquiry is out of the country, but asks you to wire any fees to someone, don’t do it. Read more about rental scams on the FTC’s website.

We’ve thrown a lot of information at you with these ten types of real estate scams, but ultimately it comes down to staying vigilant, keeping yourself updated on the latest scam tactics (so you can know how to avoid them) and working with qualified lending professionals. The good news is that most real estate and lending professionals are trustworthy and have the expertise to help you meet your goals. In fact, AmeriSave has a knowledgeable and seasoned team of mortgage bankers who are ready and available to help you successfully (and safely!) navigate the real estate process.

Common Real Estate Scams And How To Avoid Them

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Scams to be on the lookout for